Sharon Lam Morgan Stanley Asia Research Vice President

By Kim Jae-kyoung
Staff Reporter

Korea should place a top priority on promoting research & development (R&D) to emerge as an winner in the post crisis world, according to a global economist watching Asian economies, including China and Korea.

In an interview with The Korea Times, Sharon Lam, vice president of Morgan Stanley Asia Research, said that the government should focus on three key issues ― promote R&D, service sector deregulation and regional development. Among them, she cited the R&D development as the key to success.

"Korea's export sector has proven to be much more defensive and I don't think it's only because of currency. It is the emphasis on R&D that pushes Korea's product quality and design that help Korean products to penetrate into global market faster even during global downturns," Lam said.

She said that Korea has finally broken its sandwich position between Japan and China as its market share in many leading industries have exceeded Japan, but Korea cannot relax as China will be catching up quickly.

"Business are still cautious on capital expenditure after this global crisis, so incentives on R&D must be strengthened in order not to let Korea's competitiveness to slip. R&D is not only for bolstering the existing industries that are pillars for growth, but Korea also need to find new source of growth," she said.

She pointed out that R&D is to maintain current competitiveness, service sector expansion is to raise growth potential, and regional growth is to improve living standard for the whole country. "If these can be achieved, there is still significant room for growth in Korea for at least another decade," she said.

The Hong Kong-based economist also called for the country to remove red tapes in the service sector and to take actions to improve the imbalance regional growth.

"Service sector deregulation will help to attract FDI inflow and it will also help the economy to be less dependent on export growth," she said.

"It is important to transform the economy into service-based in order to improve quality of living and also to create jobs for the young labor force otherwise there will be a mismatch in labor demand and supply," she added.

Regarding the imbalanced regional growth, she pointed out that it is one of the root cause for Korea's widening income inequality and that it is also complicating policy direction.

"The two-pronged development in the property market in Seoul and provincial areas are causing macro policies to be less effective," she said.

"In order to take Korea to the next level, it must establish several business centers ― each with a unique industry focus ― across the country. I think the government's local infrastructure plans are warranted, and this will also help attract foreign capital," she added.

kjk@koreatimes.co.kr